A Bridge Loan
A bridging loan is a good choice if you need short term finance before a larger loan can be obtained from a lender. Bridging loans are also known as swing loans or caveat loans. They are obtained when bigger amount of a loan is temporary not available. A bridge loan is obtained for a short period of time from two weeks to three years.
The biggest advantage of this type of a loan is the speed and its getting. Suppose you need to pay cash down payment on your new house within a short period of time. In such situation you don’t have an opportunity to wait going through complicated paper work to get the cash. The bridge loan is the best solution for such situations.
Usual types of loans have strict rules that must be followed. Bridge loans can be obtained with little or no documentation. However, this might have risk because interest rates are quite high, beside additional costs. The additional charges and high interest rate make risk for the lenders. Lenders providing bread loans often ask for secured advance and a lower loan to value ratio as well. That’s why it’s recommended to think carefully before getting the bridge loan.
Interest rates for such loans are usually between 12 to 15% for 12 month term loans. For commercial properties to value ratio won’t be more than 65% while for residential properties it won’t be more than 80%, calculated on basis of assessed value of specified property.
These loans can be of open and closed types. An open bridge loan has no fixed term within which it must be paid back. This involves greater risk for the lender, because this type of loan will have a higher interest rate. However, a certain date is established since when regular payments towards paying back the loan must start. A closed bridge loan has a fixed period within which the loan must to be paid back. This type of loan has lower interest in comparison with the open bridge loans.
These kinds of loans have much in common with hard money as both are non-standard high risk loans that are applied for in times of financial crisis. Hard money loans refer to source of the loan which may be private individual, private company or an investment pool. Banks do not offer such loans. Bridging loans on the other hand refer to the duration of the loan.
refinancing during BK-13
If BK-13 was filed over 12 mos ago and has paid the trustee as agreed based upon semi-annual trustee reports that are mailed to the customer or pay history direct from the trustee and on-time payments to mortgage company outside of the plan during the BK-13 this customer could be helped provided the credit score is above 500. You would either have to get approval from BK court to do this (is easy to get but does take some time to get) or a payoff quote from the trustee directly and depending upon your lender could refi based on just that without having to go to court to get approval.
FHA lender
I just closed an FHA loan where my clients just wrapped up a Consumer Credit Counseling (CCC) program and most lenders treat CCC as a BK. There is a provision in HUD’s guidelines that allows an FHA lender will fund a loan AND allow the BK to stay open. I said “may” at the beginning of the message due to the late you spoke of. the trustee, the judge and the person’s attorney all have to approve the deal and a pay history from the trustee will be needed for review by the lender. I disagree with whoever said toss the deal in the trash but you should pull a merged report before you submit the deal to a lender to be sure that everything listed in the credit report is also listed in the court papers. The chances are good that some creditor did not respond to the courts to have their interest represented in the BK and the debt was placed with a collection agency. Under this program, any debt that is not being paid though the courts and shows up on credit is a possible deal killer.
purchase with open Chapter 13 BK (IL)
Is it possible to do this type of transaction? My clients want to purchase a single family, owner occupied in Illinois. They received the trustee’s permission to buy but who will lend and under what circumstances. FYI — there was (1) late to the trustee in 7/01 due to spouse being temporarily on medical leave. BK was filed 4/00. I don’t have any other info than this; will begin processing only if loan is possible.